The BT Pension Scheme (BTPS) has entered into a longevity reinsurance arrangement with Reinsurance Group of America (RGA) which will further protect BTPS from the cost of unexpected increases in the life expectancy of its members.
As mentioned, the arrangement covers £5bn of BTPS pensioner liabilities and follows the £16bn of liabilities covered by a similar arrangement entered into by BTPS in 2014.
According to BT, the reinsurance was facilitated through an insurance intermediary via the Scheme’s existing ‘captive’ insurer, thereby efficiently leveraging the Scheme’s existing infrastructure.
The transaction will have no impact on the firm’s cash contributions to the Scheme, nor on the 2023 triennial valuation.
The transaction was led by Brightwell, BTPS’ primary service provider, together with WTW and Allen & Overy, with RGA being advised by Eversheds Sutherland.
Otto Thoresen, Chair of Trustees, BTPS, commented, “Longevity risk is one of the biggest risks facing the Scheme. This transaction helps provide greater certainty for the Scheme, our sponsor and members.”
Wyn Francis, Chief Investment Officer, Brightwell, said, “With this transaction, we’ve taken a fresh approach using technology to drive down the time between quotation and execution. Protecting the Scheme from unexpected rises in life expectancy is a core component to reaching a cash flow matched position by 2034.”
Emma Ferris, Senior Vice President, Global Financial Solutions, RGA UK, added, “We are delighted to have partnered with BTPS to help reduce the longevity risk in the Scheme, using our financial security and longevity expertise to enable the Scheme to focus on its core mission of providing stable and sustainable retirement benefits.”
See more on longevity swaps and longevity risk transfer transactions in the directory of our sister publication, Artemis.